Taxes can be complex, especially when it comes to claiming credits that reduce your tax liability. Sometimes, the IRS may deny certain credits, and this can lead to complications when trying to claim them again in the future. If you have previously had a tax credit disallowed or reduced, but now qualify to claim it, the IRS requires you to file Form 8862. This form is specifically designed for individuals who want to reclaim certain credits after they were previously disallowed or reduced.
What Is IRS Form 8862?
IRS Form 8862, titled Information to Claim Certain Credits After Disallowance, is a form used by taxpayers who wish to reclaim one of the following tax credits after it was previously denied:
- Earned Income Credit (EIC)
- Child Tax Credit (CTC)
- Additional Child Tax Credit (ACTC)
- American Opportunity Tax Credit (AOTC)
- Credit for Other Dependents (ODC)
If you had one of these credits denied or reduced in a prior year and now believe you are eligible to claim it, Form 8862 is required to provide the IRS with additional information confirming your eligibility. Filing this form helps ensure that the credit is correctly applied and that any previous disqualifications are addressed.
Why Do You Need to File IRS Form 8862?
The IRS disallows tax credits for a variety of reasons. If you previously made an error on your tax return, failed to meet eligibility criteria, or the IRS determined that you improperly claimed a credit, they may disallow that credit. When this happens, you cannot claim that same credit in future years unless you file Form 8862 to verify that you meet the necessary qualifications.
Without filing this form, even if you are otherwise eligible for the credit, the IRS will not allow it. Filing Form 8862 after a disallowance ensures that you can regain eligibility and claim the credit again in future tax years.
Who Needs to File IRS Form 8862?
You are required to file Form 8862 if:
- You were previously denied or had any of the credits listed above reduced, and
- You now meet the eligibility requirements for the credit and want to claim it again.
However, there are exceptions where you don’t need to file Form 8862:
- If your credit was denied or reduced solely because you didn’t provide additional information at the time and you’re now filing an amended return with that information.
- If you are claiming the EIC without a qualifying child after having previously been disallowed for claiming the EIC with a qualifying child.
How to Fill Out IRS Form 8862?
Form 8862 is relatively short but requires accuracy to avoid further complications with the IRS. Here’s a breakdown of the steps to fill it out:
1. Personal Information
- Start by entering your name and Social Security number (SSN) at the top of the form. Make sure this matches the information on your tax return.
2. Part I: Earned Income Credit (EIC)
- If you are claiming the Earned Income Credit after it was disallowed, you will need to complete this section. You will provide detailed information on the number of children, their SSNs, and your filing status.
- You’ll answer a series of questions confirming your eligibility for the EIC, such as whether you lived in the U.S. for more than six months of the year, whether your qualifying child lived with you, and whether you provided the correct information previously.
3. Part II: Child Tax Credit (CTC)/Additional Child Tax Credit (ACTC)
- If you are claiming the Child Tax Credit or the Additional Child Tax Credit, you must complete Part II. This section asks questions about your qualifying child or children, their ages, and your relationship to them.
- You will confirm that you meet the income and residency requirements to claim these credits.
4. Part III: American Opportunity Tax Credit (AOTC)
- For those claiming the AOTC, Part III must be completed. Here, you will provide information about the student for whom you’re claiming the credit, their education expenses, and their eligibility.
- This part requires confirmation that the student is enrolled at least half-time in a degree program and that you did not incorrectly claim the AOTC in a previous year.
5. Part IV: Credit for Other Dependents (ODC)
- If you’re claiming the Credit for Other Dependents, Part IV is required. You will provide details about the dependent, their age, and their relationship to you. You’ll also confirm whether you’ve met the requirements to claim the ODC.
6. Part V: Certification and Signature
- In the final part, you certify that the information you’ve provided is accurate and complete. Be sure to review your answers before signing.
How to File IRS Form 8862
Once you’ve completed the form, you’ll need to attach it to your individual tax return (Form 1040, 1040-SR, or 1040-NR). If you’re filing electronically, Form 8862 will be submitted as part of your e-filed return. For paper filers, make sure to include Form 8862 with your physical tax return when mailing it to the IRS.
After submitting Form 8862, the IRS will review the information to determine if you are eligible to reclaim the disallowed credit. If the IRS approves your claim, the credit will be applied to your current return, and you may receive a refund if applicable.
If the IRS denies your claim, they will send a notice explaining why the credit was not allowed. In some cases, the IRS may ask for additional information or documentation to verify your eligibility.